Posts Tagged ‘failure’

Acquisitions fail far more often than they succeed. You can easily find statistics to prove that.

If you’re not a numbers person, then you only have to think of AOL and Time Warner; and News Corp and MySpace.

Those are all big corporations, I know, but it’s nice to see the big guys get a bloody nose every now and then.

Buying another company, as part of a growth strategy, isn’t something that we see often.

It’s probably done most frequently when a client buys a smaller competitor in a Province, State or country they’re not already in. They’re quickly expanding their existing business by adding experienced sales, service and support staff where they had none.

What’s even less common is seeing a client buy a company whose products and services are “complimentary” to theirs.

There’s a lot for privately-owned businesses to worry about with acquisitions.

For a start, there’s getting a fair valuation for the target company and being thorough in due diligence to make sure nothing is missed. If a ‘biggie’ like Hewlett-Packard can make a mistake (with Autonomy), then anyone can.

Then, when the deal is done, there’s the whole challenge of integrating the people, who may be used to doing things in a completely different way. Not to mention different (and often incompatible) accounting and CRM systems.

When business owners buy a company for the first time, they often underestimate the lack of direct control they have over their new acquisition. And it seems to increase with the distance between the parent company and the new one. (Compare driving across a city to flying across the country to “sort something out”.)

So, why bother?

Because, like many things in life, it’s not what you do, it’s how you do it. Go back to the ‘biggies’ again for a moment and think about Google and YouTube or Best Buy and Geek Squad. Done well, acquisitions provide a great return on investment.

There’s research that says if a company is bought to expand the existing business, then it should be absorbed into the buyer as quickly as possible. Signage, letterhead and all other image stuff must be changed to that of the parent company. Duplicated or conflicting processes and systems must also be replaced. But if the acquisition is made to complement the buyer’s business, then the new subsidiary is best run separately and left with it’s own identity.

Which makes sense if you think about it this way. ABC company buys XYZ company.

If the XYZ is same business as ABC, the owner and management team at ABC already have been successful in that business and, hopefully, know why. XYZ should be folded into ABC.

If the XYZ is in a separate, but complimentary, business or industry, XYZ’s owner and management team have presumably been successful. Otherwise, ABC would have bought another company. So ABC should leave them alone.

All of which will make watching Yahoo’s acquisition of Tumblr interesting…..

One of the things I dislike about the popular media is the way they create the perception of instant success.

When they write a story about a business or an entrepreneur they focus on what she or he has achieved. The failures that went before the success get much less time than the ultimate, hard won, success – if they’re mentioned at all.

Are the media doing business owners a dis-service? I think so.

Years ago I saw a great quote (I don’t know who said it) – “The only place success comes before work is in the dictionary.”

I’d like to modify it to read, “The dictionary is not the only place failure comes before success.”

Persistence is important. But when everything that could possibly go wrong does, it’s easy to falter. And faltering becomes easier with every setback that occurs.

We need to know when to quit. But that decision must be based on informed judgement and the advice of those we trust. It’s also not a decision to be made immediately after a failure. (Wikipedia says that James Dyson created 5,127 prototypes before developing the vacuum cleaner he thought was perfect.)

When things go wrong our emotions come into play – and they can be influenced by an article/post about an apparent male/female wonder.

So it’s nice to see a piece that helps restore balance.

There was a blog post in January that recorded the 5 biggest mistakes that, in the author’s opinion, Steve Jobs made. I’d either forgotten, or didn’t know, that:

1. Jobs lured John Sculley to become CEO of Apple. Sculley had Jobs fired and almost broke the company.

2. Jobs thought Pixar would be the greatest hardware company ever. Easily overlooked now given Pixar’s huge subsequent success with digitally-animated films like Toy Story.

3. Few Silicon Valley insiders agreed that NeXT computer was a great success when Apple purchased it. The company struggled from the beginning to understand the right customers and markets for its products.

4. The (numerous) products that failed – the Apple Lisa; Macintosh TV; the Apple III; and the Power Mac G4 Cube. The iPod, iPhone and iPad were such great successes that it’s easy to overlook the bombs.

5. Jobs tried to sell Pixar numerous times in the late 1980’s for around $50 million. There were no takers. Just as well. Disney paid $7.4 billion for it in 2006.

There’s no doubt that Steve Jobs was an exceptional man, a visionary. But it’s reassuring to know that he didn’t win every battle he fought. He was human – just like the rest of us!

That will help me the next time I’m having a really bad day. What about you?

Peter Sims, who wrote the blog post, closes by saying that “The antidote is to try a small experiment, one where any potential loss is knowable and affordable.”

Reminds you of the ‘pilot, perfect and scale up’ process we talked about last week doesn’t it?

A few years ago I was on a team that had to cross a river of fast-flowing, freezing cold water without anyone getting hypothermia. And it had to be done in a certain amount of time or there would be unpleasant consequences to face.

One of the team was appointed leader and quickly solicited input from the rest us before announcing his plan. We got to work and, for a while, things went well.

But then it began to look like the plan wasn’t going to deliver the outcome we needed – just as sometimes happens in business. The leader tried to adapt his plan several times and in several different ways. It still wouldn’t work.

By this point we were very short of time.

He continued trying to modify the plan. His team became more demotivated, and distinctly less supportive, as the minutes ticked away. As you’ve no doubt guessed…..

We didn’t make it – and there were unpleasant consequences.

The river crossing was a leadership exercise, part of our officer training program. The leader didn’t graduate. You can argue that it’s not the same as losing a company – or even losing money – but it was pretty traumatic for the guy.

Until then I’d always been taught that persistence was important. However, even though our leader persisted, we weren’t successful. Clearly, there was such a thing as too much persistence.

But how much is too much?

When do you call a halt without, in retrospect, wondering if you quit too soon, a question every business owner has to answer more than once? Like most entrepreneurs we work with, I’ve developed my own guidelines for dealing with the “persistence versus pigheaded” question.

I particularly like the “interim” measures she proposes – are there signs of progress; has there been concrete achievements; is resistance declining? Nothing happens as quickly as we think – and plan – it will. So it’s important to look for indications that we’re on the right path.